A.M. Best Places Ratings of Humana Inc. and Its Subsidiaries Under Review with Positive Implications

A.M. Best has placed under review with positive implications the financial strength ratings (FSRs) and the issuer credit ratings (ICRs) of the insurance subsidiaries of Humana Inc. (Humana) (Louisville, KY) [NYSE:HUM], as well as the ICR and senior debt ratings of “bbb-” of Humana. (Please see link below for a detailed listing of the companies and ratings.)

The under review status follows the announcement that Humana has recently entered into a definitive agreement in which it will be acquired by Aetna Inc. (Aetna) [NYSE:AET] in a transaction valued at roughly $37 billion. Aetna would acquire, in cash and stock, all of the outstanding common stock of Humana for approximately $230 per share. The new organization will also assume Humana’s $3.8 billion in outstanding long-term debt. The transaction is subject to approval by stockholders, as well as state insurance departments and other regulators.

The pairing brings two major health insurance and health service organizations together with complementary business scopes, strong service capabilities and product diversification. The combination will result in a leading player in the commercial and Medicare Advantage product segments, add greater capabilities and scale in the senior markets, and bring additional diversification in other government-sponsored programs and geographic markets.

A.M. Best notes the potential integration risk, business execution risk and the substantial increase in leverage and goodwill as a direct result of the acquisition. Humana operates in a number of regional markets within the United States and Puerto Rico. The company has cultivated a significant level of business diversification in order to meet the many needs of its members through integrative services, following a comprehensive suite of medical managed care as well as complementary services in three reportable segments.

The ratings will remain under review pending the transaction’s closing, which is expected to occur in the second half of 2016. A.M. Best plans to hold detailed discussions with senior management regarding potential synergies, capital structure, projected operating performance and capitalization of subsidiaries.

For a complete listing of FSRs, ICRs and debt ratings for Humana Inc. and its life/health subsidiaries, please visit Humana Inc.

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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